Low interest rates and tight inventories have pushed Vancouver house prices into uncharted territory, even as affordability across the rest of the country remains near historical levels.

The Royal Bank of Canada said yesterday it would take 92 per cent of the median household’s pretax income to own a bungalow in the city at current prices – the highest reading yet in its quarterly national survey on affordability.

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“Vancouver really stands alone in its extremes across all housing types,” said Craig Wright, the bank’s chief economist. “It is no doubt the most stressed market in Canada and the one facing the highest risk of a downturn. With the bar set so high, owning a home is a dream that only the area’s highest-earning households can contemplate.”

The bank said most Canadian cities offered “reasonably affordable” housing options in the second quarter compared to the first. Nationally, a condo required 29.2 per cent of pretax household income (a 0.8 per cent increase), a bungalow 43.3 per cent (1.7 per cent) and a detached home 49.3 per cent (1.8 per cent).

“Despite the erosion so far this year, most local housing markets in Canada continue to be reasonably affordable at this juncture or, at worst, just slightly unaffordable,” the bank stated in its release. “Affordability measures generally continue to stand near their respective long-term averages.”

The bank’s affordability index looks at the proportion of pre-tax household income needed to service the costs of owning different categories of homes at current market values. Its standard measure is a 1,200-square-foot bungalow, and the carrying costs include mortgage payments (principal and interest), property taxes and utilities.

It assumes a 25-per-cent down payment, a 25-year mortgage and a five-year fixed rate mortgage. The higher the reading, the more costly it is to own a home based on current market values.

The numbers are still high by its own standards, however, and that’s with low interest rates keeping mortgage payments low. The bank said that “typically” no more than 32 per cent of a borrower’s gross annual income should go toward servicing a home.

That has some questioning just how affordable the Canadian market actually is, especially if interest rates begin to rise and mortgages become more expensive.

“We’ll get people who ask how much they can afford and we quite often tell them that they just can’t afford what they want to pay,” said Ted Rechtshaffen, president of financial planning company TriDelta Financial in Toronto.

“They have agents saying that prices are only going up, and the banks are willing to give them loans for more than they can afford. They don’t like what we say sometimes, but it has to be said.”

RBC said it would take an income of $157,800 to buy a Vancouver bungalow in the second quarter, and that the average house price in the city was $822,300 – 19 per cent higher than a year ago.

Mr. Wright said part of the problem is that there aren’t that many bungalows in Vancouver. To find something more affordable, he said, most people turn to condos which carry a lower carrying cost.

“Vancouver has always been a bit of an outlier and it still is in this report,” said Mr. Wright, adding the city’s affordability readings were also affected by a downward revision to income growth in Vancouver going back to 2009. “What those numbers tell you is that it’s basically impossible for someone making a median income to buy a bungalow in the city.”

High prices have put home ownership out of the reach for many, at least if they want to stay in the city and live in a standalone house instead of a condo tower. Financial planner Adrian Mastracci has one standard piece of advice for young families who walk through the door of his Vancouver office looking for advice on how to buy a house.

“I tell them they need to go to the Bank of Mom and Dad and see how much money they can withdraw for a giant down payment,” says Mr. Mastracci, president of KCM Wealth Management Inc. “Otherwise, I tell them to consider a condo or to look outside of the city.”